Coffee farmers reluctant to borrow from Sh1.7bn fund
A coffee farmer. Most society officials prefer loans from millers and marketing agents because repayments are deducted directly from their produce, however long it takes. FILE PHOTO | NMG
What you need to know:
- Many farmers’ co-operative societies, however, appear uninterested in accessing the Stabex funds (Stabilisation of Export Earnings) for their members.
- Societies can also use the money to replace old pulping machines in their plants, which is part of coffee reforms proposed by a task force that President Uhuru Kenyatta appointed last year.
- But most society officials prefer to seek loans from commercial banks or rely on the money they get from millers and marketing agents.
A Sh1.7 billion revolving fund re-established by the government to heal the ailing coffee sub-sector may soon become another white elephant.
The money is supposed to be apportioned to growers as cherry advance, where they get cash upon delivery of their crop to respective factories instead of the norm where they have to wait for months. It is also intended to help growers buy farm inputs.
Many farmers’ co-operative societies, however, appear uninterested in accessing the Stabex funds (Stabilisation of Export Earnings) for their members.
Societies can also use the money to replace old pulping machines in their plants, which is part of coffee reforms proposed by a task force that President Uhuru Kenyatta appointed last year.
But most society officials prefer to seek loans from commercial banks or rely on the money they get from millers and marketing agents.
This now pits society officials against government agencies that have been charged with reviving the sub-sector.
In his speech during Madaraka Day celebrations in Nyeri, President Kenyatta said a Sh1.7 billion Stabex fund had been established through the Co-operative Bank of Kenya to boost coffee revival efforts.
He said the fund was part of debt waiver for loans that coffee farmers owed creditors. The government wrote-off the outstanding advances to comply with the task force proposals.
Commissioner for Co-operatives Mary Mungai does not understand why farmers’ societies are not borrowing the Stabex money, which she said has an interest rate of five per cent.
“The money is there. It is in circulation and it is very subsidised. The bank is only holding it in trust for farmers,” the commissioner explained. She said marketers and millers should not advance money to farmers, as this would amount to conflict of interest.
The chairman of the coffee task force, Prof Joseph Kieyah, who is also heading the committee implementing the reforms, agreed with Mrs Mungai.
“Marketers and millers should not be in the business of lending farmers money. It is the work of the government to do so,” Prof Kieyah points out.
He said the cherry advance to farmers is to ensure they get some cash upon delivery of their crop instead of waiting several months, which forces some to borrow heavily after investing all their money in harvesting.
A former chairman of a co-operative society in Nyeri said they prefer loans from millers and marketing agents because they charge very low rates. “Some charge as low as one per cent,” he said, but admitted that there are some who do not disclose how much the coffee has fetched in the market.
The chairman of the giant Othaya Coffee Farmers, Mr James Gathua, said they no longer go for loans offered by the government. He recalled a case where they once borrowed money from the Coffee Development Fund (CoDF), currently known as Commodity Fund. The fund established by the government was intended to benefit small holder farmers.
But Mr Gathua said CoDF was charging high interest rates that saw several growers default on payments. “I am not aware about the Stabex Fund. We don’t want to risk going for this money as there are a lot of things to consider first,” the society chairman said.
Like Mr Gathua, most officials of coffee co-operatives said they would not borrow cash from the Stabex Funds. Most society officials prefer loans from millers and marketing agents because repayments are deducted from their produce, however long it takes.
Also, some commercial firms take advantage of growers who have no idea how much their coffee fetched in the market. Society officials are also said to collude with marketers and pilfer money from members, as happened in Kimaratia Co-operative Society of Gatundu South, Kiambu County, two years ago. About Sh60 million was reported missing.
